E1-2 – Policies Related to Climate Change Mitigation and Adaptation

Climate Change Mitigation and Energy

When it comes to managing its material impacts in connection with the subtopics of climate change mitigation and energy, as well as the associated risks and opportunities, Vonovia has a concept in place that comprises three levers from the transition plan (climate pathway):

• Energy savings through energy-efficient modernization of the building envelope
• Increasing the share of renewable energies in the neighborhood
• Comprehensive transformation of the energy sector

The climate pathway is based on the principle of closely interlinking economic viability and the reduction of emissions. This principle is illustrated in the decarbonization tool (DCT) prioritization mechanism. The DCT reflects all relevant ecological and commercial aspects of the housing stock and determines how the refurbishments of individual buildings should be prioritized over time, which is then aggregated into an overall plan. The result of this prioritization is then set out in more specific detail in the plans for energy-efficient refurbishment and the energy concepts. In doing so, we adopt a holistic view at neighborhood level, examining both the modernization of the building envelope and the conversion of the energy supply to climate-friendly systems in their wider context. Our approach is shaped by the concept of sequential development. This means that, depending on the buildings’ initial condition with respect to energy efficiency, the measures to enhance the individual buildings and advance towards the 2045 targets set in the climate pathway are staggered in some cases.

With regard to its Development business, Vonovia’s strategy is to use its new construction activities to create urgently needed new and affordable homes with optimized energy efficiency profiles and a large proportion of renewable energy use. BUWOG has a sustainability strategy for development. Guides, specifications and tools have been developed in 14 focus areas to address the full range of sustainability aspects in new construction. These include optimized heat supply in the neighborhood, the use of ecological building materials and designs for open spaces. The strategy is based on the use of the German efficiency house standard or the basic criteria of Austria’s “klimaaktiv” initiative. The average primary energy demand (non-renewable) of newly constructed buildings, in relation to rental area, is the most important non-financial performance indicator in development.

The integration of these policies into our corporate management is achieved via the Sustainability Performance Index (SPI), which includes the subindicators CO₂ intensity of the housing stock in Germany and average primary energy demand of newly constructed housing. Specific targets for all SPI indicators are defined during the budgeting and mid-term planning processes. These are closely linked to investment planning and are approved by the Management Board. The forecasting process is used to monitor target achievement. Measures to achieve the targets are implemented through dedicated investment programs and action plans in the relevant business and specialist units. For a detailed explanation of the SPI, see ESRS 2 GOV-3. It is implemented by the Controlling and Sustainability departments. The subindicators and the SPI, as well as the progress made, are described in detail in the Annual Report, the ESG Factbook and on Vonovia’s website.

The general aim of the transition plan is to achieve a greenhouse gas-neutral housing stock in Germany. The concept of the climate pathway and its incorporation into the Sustainability Performance Index cover the impacts and opportunities relating to the subtopics of climate change mitigation and energy.

The climate pathway refers to the housing stock in Germany. It looks at greenhouse gas emissions for the supply of heat and warm water (Scope 1 and 2) as well as the upstream chain involving the energy sources used in this regard (Scope 3.3). The climate pathway and its three levers were approved by the Management Board.

Climate Change Adaptation

Regarding the management of its material impacts in connection with the subtopic of climate change adaptation, Vonovia pursues a policy founded on a neighborhood-based, holistic development approach, known as urban quarters (for a definition of the term and further details on the related policy, see the chapter “Company-Specific Disclosures: Neighborhood Development”). The principle is that the neighborhood (or urban quarter) serves as the central management level at which the company’s business model and strategy are manifested. The neighborhood approach allows us to develop socially and ecologically sustainable places for people to live together, improving our tenants’ quality of living in the process. This also includes adapting neighborhoods to deal with the expected effects of climate change, such as an increase in average temperature or extreme weather events.

Segmentation by urban quarters based on the definition above is only used for the German market segment at present. This means that 77% of the strategic portfolio is covered by the neighborhood concept. Which equates to 770 neighborhoods. Neighborhood-based approaches are also pursued in Sweden and Austria, but based on different segmentation principles. The Management Board is responsible both for the decision to structure the portfolio and for the resulting segmentation into urban quarters and urban clusters. All measures resulting from this decision for a specific neighborhood area are planned and reviewed in the respective regional business areas before they are implemented, working in collaboration with the departments for investment, climate-neutral housing stock and corporate development.